On January 19th, Avaya filed for Chapter 11 bankruptcy protection. What is really interesting about the announcement is how the different media outlets are covering the story. It reminds me of this past presidential election and the partisan coverage of CNN, MSNBC, FOX, et al… In this case I suspect that the rosier the coverage, the more spend that outlet has from Avaya.
Network World has an article from the CFA and Corporate Treasurer at Avaya, John Sullivan, “ Avaya: How we arrived at Chapter 11” which reads like a Belichick game plan to victory. Conversely, Phil Edholm’s No Jitter blog tells it like it is. The real question in my opinion is what will Avaya prospects and customers do? With a self proclaimed 13% of revenue coming from new customers can Avaya or any of these favorable reviewers actually think they will come out of this in one piece or at all. After being held hostage by Avaya's legacy communication solutions for many years, existing customers will immediately start looking for the exit door. New prospects will move to alternative options. This cannot be the way forward out of bankruptcy.
Regardless of which parts of the business get sold off during the Avaya bankruptcy, the unified communications business and specifically the hardware component revenues will tank. The backbone of this business will be the recurring service revenues. This revenue is a crutch that will eventually crumble. We have seen this story play out before with Nortel and it was not pretty. Phil gets the story straight, but I disagree with his sentimental opinion about a healthy Avaya being good for the industry. I do not see a “successful and vibrant Avaya” adding any value to the industry.
The communications industry is moving forward at a faster and faster pace driven by new companies and new technology. The current business transformation being driven by mobile technology warrants a new paradigm. Legacy business models, such as Avaya’s, take time to transition and the market will not wait for them. The news of Avaya’s bankruptcy is an opportunity to move the industry forward. The market is not sentimental and “good times” are in the past for Avaya. So where does that leave things? Avaya customers wake up and smell the roses, you need a new communications partner!